Deals expert announces record results and says Yorkshire market set to improve again

Corporate & commercial lawyers

21.07.2006

One of Yorkshire's leading deals experts has announced a record six months for his team and sees the regions market in good shape to surpass its 2005 performance this year.

Kevin Cunningham, head of corporate at Irwin Mitchell, based at its offices in Leeds and Sheffield, reported an increase of more than 10 per cent in the number of deals his team advised on in the first half of this year, with its income rising by a higher amount.

Mergers and acquisitions

His team advises Yorkshire businesses on deals including disposals, acquisitions, initial public offerings (IPOs), joint ventures, buy-outs and buy-ins. It worked on more than 30 transactions in the first six months of 2006, ranging in value up to £140m.

Mr Cunningham said: "I'm delighted the initial half of the year has been so busy for us. We strive to provide a quality service and this is reflected in the number of clients who return to us after we have worked with them before."

Among the deals his team advised on during the six months was the multi-million pound agreement by governing body World Snooker to a package put together by organisations including Yorkshire Forward and Sheffield City Council, which will keep the world championship at the city's Crucible Theatre for the next five years.

His team also advised on the set up of the innovative World Snooker Academy based at the English Institute of Sport, also in Sheffield.

The team also advised Leeds-based Schawk UK Limited on the acquisition of Group Creative Services in York from Nestle.

Other transactions Mr Cunningham and his colleagues worked on included the £6m management buy-out at Sheffield 3D software firm VSI, financed by HSBC, and the acquisition of Zoo Digital Publishing, also based in the South Yorkshire city, by former sales director Barry Hatch.

Corporate & commercial expert

Commenting on the buoyant market in the region as a whole, Mr Cunningham said: "There has been sustained activity, with resurgent areas, such as Bradford and Sheffield, now attracting significant investment. Leeds is also cementing its position as one of the north's leading deal centres and its professional community is increasingly advising on transactions involving companies from outside the region.

"An example of this was our working with the shareholders of Rugby-based bank account validation and payment processing software provider Eiger Systems on its acquisition by Nottingham-based Experian, the global information solutions company, in one of the UK's most significant acquisitions of the year so far."

He said one of the reasons for the upbeat performance was high levels of debt funding remaining available from a wide range of sources, including banks, venture capitalists, private equity providers and invoice discounters.

He said: "A wide range of sophisticated options is now on offer. One in particular, the HBOS Integrated Finance package, was used to support the management buy-in at £20m turnover Sheffield specialist machinery firm Mayflower Technology, which we advised on."

Mr Cunningham said he had observed a slight change in the strategies of some private equity investors during the period, however, as they focussed on bigger transactions and potential returns.

Expressing concerns about the level of debt funding being provided by some of these players, he said: "Their zest for high value deals is risking putting them and the companies they support in unstable positions. Competition may drive some private equity investors to overpay and provide precarious levels of gearing."

Mr Cunningham added, however, that the private equity houses drive towards ever-larger deals had left a gap which was being partly filled by arguably one of the most effective new entrants to the Yorkshire market in recent years. Endless, the £100m Leeds-based fund launched last year by former Ernst & Young insolvency partner Garry Wilson, has been providing between £500,000 and £20m to help companies unlock their potential.

Pointing to another factor influencing the Yorkshire market positively in the last six months, he said: "The favourable tax regime, including the availability of taper relief, which reduces Capital Gains Tax payable on share sales, also continues to create an attractive economic environment for deals."

Mr Cunningham went on to identify another significant change which had become apparent in the last half-year. He said his team was increasingly being asked to review the performance of companies in a review and grooming process prior to sale in the interests of the best prices being secured and transactions progressing smoothly.

Assessing the health of particular Yorkshire sectors, Mr Cunningham said: "One worry is retail, where a significant number of companies are under-performing and the level of activity has reduced, as consumers rein-in spending.

"A much rosier picture is evident, though, in the property sector, which continues to defy all the gloomy predictions, maintaining its attractiveness as an alternative home for funds from investors wanting to avoid stock market volatility."

Mr Cunningham felt that AIM flotations were beneficial in the right circumstances but added that confidence had been weakened by recent market turbulence.

He commented that this volatility together with expectations of increased interest rates and energy costs were having a dampening effect on credit applications and activity and he hoped that pressure for interest rate rises would be resisted.

A positive trend this year, he said, had been the return of the trade buyer with his team advising on more exits via this route than in previous years.

Summing up his prognosis for the regions deals market in the second half of 2006, Mr Cunningham said: "Although we can expect the usual summer lull in activity, I'm confident things will pick up again in the autumn and, if we can avoid significant interest rate hikes, that the year as a whole will outperform 2005."